Keeping to a budget in the middle of a cost of living crisis can be a real headache, and having any money left to save can feel like the stuff of fantasy. That’s especially true when you’re also trying to keep up with the Joneses and not miss out on social events with friends and family.
Let’s dive into the impact of financial peer pressure on mental health. Then, we'll dish out some practical tips to handle money in a healthier way without compromising our wellbeing and relationships.
Money worries can affect your mental health
Unfortunately, that’s a fact. Approximately 64% of adults in the United States report that money is a significant source of stress in their lives, according to the American Psychological Association's annual Stress in America survey conducted in 2020.
Money worries have the power to cast a dark shadow over our lives, affecting our overall wellbeing in various ways as we try to make ends meet or face uncertainty about our financial future.
Constant financial stress can lead to anxiety, depression, and sleep issues. This emotional turmoil can disrupt our daily lives, cause friction or stress in our relationships, and negatively impact our working lives or studies.
But what does peer pressure have to do with that? The pressure to have the latest phone, the newest trainers or to split the bill at a restaurant you can’t afford can be tremendous. This can create a perpetual cycle of anxiety and inadequacy when we’re unable to match the perceived lifestyles of others. In turn, this can lead to feelings of worthlessness and a negative self-image.
What’s financial peer pressure?
Financial peer pressure refers to the influence that friends, colleagues, or family members can exert on someone's financial decisions and behaviors. It occurs when people feel compelled to match the spending habits and lifestyle choices of their peers, even if it goes beyond their financial means.
This pressure can lead individuals to overspend, accumulate debt, or make financial choices that are not in their best interest, all in an effort to fit in or be accepted within their social circle.
Financial peer pressure can manifest in various ways, such as:
“Keeping up with the Joneses”
This refers to the perceived “need” to buy the same (expensive) items or follow the same lifestyle as friends or acquaintances, regardless of whether it aligns with your budget or financial goals.
Fear of missing out
FOMO can do a lot of damage to your wallet. It can push people to spend too much money on social activities, events, or experiences to avoid feeling left out or excluded from their social group.
Social status
Do you see spending money as a sign that you’ve “made it”? Financial peer pressure can make people feel like they have to project a certain appearance through material possessions.
Social norms
This might be one of the most challenging manifestations of peer pressure, as it’s particularly difficult not to align with the spending habits prevalent within your particular social group or community, even if it may not be financially prudent for you.
Gift-giving pressure
Ever felt obligated to spend a significant amount on gifts or treats for friends or family during special occasions or celebrations? Gift-giving pressure can really take a toll on our budget, especially around the holidays.
When social activities put financial wellness at risk
Whether it's dining out, attending events, or going on holiday, social activities often revolve around spending money. The fear of missing out on these bonding opportunities can drive people to spend beyond their means.
Peer pressure can be particularly intense during these times, as the desire to fit in and be accepted among friends, colleagues, and family members can overpower rational financial decision-making. Do you recognize this kind of behavior in yourself?
For example, a young professional on a tight budget might find it difficult to decline an invitation to an expensive night out with colleagues, fearing it could lead to social isolation and prevent them from advancing their career. As a result, they might find themselves burdened with debt or financial strain, leading to heightened stress and mental health challenges.
5 tips to overcome peer pressure and handle spending wisely
The intersection of money worries and peer pressure can be overwhelming, to say the least. Here are some strategies to maintain a healthy balance between social interactions and financial wellbeing.
1) Be honest
Honesty and open communication are key to overcoming financial peer pressure. Sharing your financial situation with close friends and family can foster understanding and empathy. True friends will support your decisions and make an effort to connect and spend quality time together in a budget-friendly way.
2) Suggest alternatives
Propose low-cost or free activities when planning social outings. This can include picnics in the park, game nights at home, or exploring local attractions.
Similarly, instead of an expensive present, you can spend more time crafting a thoughtful homemade gift that doesn’t cost an arm and a leg. By offering alternatives, you can share meaningful experiences and moments without financial strain.
3) Learn to say no
It's essential to recognize your financial limitations and be comfortable saying no when invited to activities that are beyond your means. Politely decline invitations that don't align with your budget, and remember that true friendships should not be contingent on spending money together.
4) Set a realistic budget for social activities
Develop a budget that aligns with your financial goals and priorities. Consider allocating a portion of your income to social activities while ensuring that you are still saving and managing debts responsibly.
While there is no one-size-fits-all answer to budgeting, financial experts often recommend setting aside around 10% to 15% of your monthly income for discretionary spending, which includes social activities and entertainment.
5) Seek support
If money worries are significantly affecting your mental health and overall wellbeing, consider seeking support from a mental health professional. Trained professionals can help you to find individual strategies to help manage stress related to financial pressures.
The intertwining of money worries and peer pressure can be daunting. By understanding the emotional toll of financial stress and recognizing the influence of social interactions on spending behaviors, we can take proactive steps to manage our finances wisely.